Intelligent Investment

Market
Outlook
2025
REPORT JAPAN
REAL ESTATE
CBRE RESEARCH
ASIA PACIFIC
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

Contents
01 Economy
With both domestic and foreign demand as drivers, the Japanese economy is expected to continue its gradual
recovery in 2025.

02 Investment
Sentiment among domestic investors and lenders was largely unchanged in 2024. Total commercial real
estate investment volume for the year is set to exceed last year’s figure, topping JPY 4 trillion by a large
margin. While CBRE expects investment volume to remain generally stable in 2025, this is predicated on only
moderate increases in interest rates. Should the BoJ hike rates at a faster-than-expected pace, purchasing
activity could stagnate as investors recalibrate their cap rate targets.

03 Office
The trend for occupiers to upgrade their office working environments to attract and retain employees
continued in 2024, pushing up office rents in almost all cities. With demand expected to stay robust, the
polarization of office rents based on factors such as building location and age should become even more
pronounced. Vacancy rates are likely to be heavily influenced by new supply, with rents increasing in cities set
to witness the addition of new stock at or below previous average levels.

04 Logistics
While the Greater Tokyo vacancy rate may remain high in 2025, the vacancy rates for Greater Osaka, Greater
Nagoya, and Greater Fukuoka should either remain low or decline slightly. The regional diversification of
logistics facilities in response to the “2024 problem” has led to a situation in which the outlook differs
significantly by area. However, with nationwide net absorption forecasted to reach around 1 million tsubo per
annum in the coming years, Japan’s LMT logistics market is certain to continue to expand.

05 Retail
In 2024, vacancy rates declined in high streets nationwide as retailers in a wide range of industries became
more eager to open new stores. In 2025, rents should continue to rise as retailers compete for a limited
number of available plots as demand for new store openings is likely to remain robust.

2 CBRE RESEARCH © 2024 CBRE, INC.

01

Economy
With both domestic and foreign demand as drivers, the Japanese economy is expected to continue its gradual recovery in
2025.
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

01 Economy

2024: BoJ moved to normalize monetary policy as wage continued to rise

Japan’s unemployment rate fell to 2.4% in September and is now approaching pre-pandemic levels, Figure 1-1: Japan unemployment rate
when unemployment was at its lowest in around 30 years (Figure 1-1). According to the
6.0%
Employment Sentiment Index in the Bank of Japan’s (BoJ) latest Tankan Survey, labor shortages in
5.5%
Japan’s non-manufacturing sector have reached the same level as those during the bubble
economy of the early 1990s. As the labor market tightens, corporates are raising wages, with the 5.0%
Japanese Trade Union Confederation win an average wage increase across all sectors of more than 4.5%
5% during the “shunto” spring wage negotiation period of 2024. This represented the first time in 4.0%
33 years that the 5% threshold had been exceeded, and came after 2023’s wage hike, which was 3.5%
the highest in 30 years. 3.0%
2.5%
Although significant, these wage increases have failed to keep pace with inflation over the past two
2.0%
years. As a result, consumer spending weakened slightly between 2023 and H1 2024, leading to a
1.5%
2.4% q-o-q (annualized) drop in real GDP in Q1 2024. However, the decline in real wage levels has

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

2020
2021
2022
2023
2024
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
begun to show signs of levelling out, with bonus payments in June and July contributing to a
positive growth during these two months. The implementation of fixed tax cuts also served to help Source: Macrobond, CBRE Research, November 2024.
consumers, boosting private consumption and leading to two consecutive quarters of positive GDP
growth in Q2 2024 and Q3 2024.
Figure 1-2: Japan 10-year government bond yield and policy rate (unsecured overnight call rate)
While 2024 has seen key shifts in monetary policy across the globe, changes in Japan have differed
significantly from those in most other major nations. With inflation beginning to ease globally, the
2.0%
central banks of most Western and Asian nations have begun to lower interest rates. In contrast,
the BoJ officially terminated its yield curve control and negative interest rate policies in March 1.5%
2024 (Figure 1-2), citing stable inflation and wage rise. Subsequently, in July, the BoJ lifted its
1.0%
policy rates (unsecured overnight call rate) from 0.0-0.1% to 0.25% and made clear its intentions to
normalize its monetary policy. In terms of the pace of future rate hikes, the BoJ is maintaining a 0.5%
cautious approach, but pledging to “continue to raise the policy rate and adjust the degree of
monetary accommodation” based on analysis of the latest data. 0.0%

-0.5%
2005
2006
2007
2008
2009

2020
2021
2022
2023
2024
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
10-year JGB yield Unsecured overnight call rate
Source: Macrobond, CBRE Research, December 2024.

4 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

01 Economy

2025 outlook: Japan's economy should continue its gradual recovery

Along with the stabilization of real wages, political factors are set to play a significant role in Figure 1-3: GDP (y-o-y) and contributions of major components
Japan’s consumer sentiment. With the ruling party coalition failing to secure an outright majority Forecast
during the recent Lower House elections held in October, the Democratic Party For the People 4
(DPFP) now holds the casing vote, and its stated policy of lowering income taxes is likely to exert a 3
positive effect on consumer spending. The party has pledged to raise the basic income tax
deduction and salary income deduction, which currently stand at a combined figure of JPY 1.03 2
million per year, to as high as JPY 1.78 million. If successful, this should further enhance consumer 1
spending. Elsewhere, the steady growth of the U.S. economy, combined with the recovery in Europe,
should push up Japanese export revenue. These twin pillars of domestic and overseas demand are 0
set to ensure that the Japanese economy continues its moderate recovery in 2025. -1
Risk factors in 2025 include the economic policies of U.S. president-elect Donald Trump. Having -2
won the presidency, the Senate and the House of Representatives, the Republican Party is well
positioned to pass many of the items on Donald Trump’s policy agenda. Of these, the forced -3
deportation of illegal immigrants, the lowering of income and corporate taxes, and the -4
implementation of trade tariffs, come with the risk of accelerating inflation. Should this scenario
-5
play out, the U.S. Federal Reserve may slow its rate cuts or even raise rates once again. Since
October 2024, the JPY has once again begun to weaken against the USD on the back of concerns -6
among investors that the Japan-U.S. interest rate differential may not contract after all. Should the 2019 2020 2021 2022 2023 2024 2025
JPY weaken still further, higher import costs would lead to steeper rises in the cost of living,
potentially leading to an even more significant drop in real wage. This suggests the possibility that
the BoJ could accelerate the pace at which it raises its policy interest rate. CBRE continues to
expect a “moderate increase in interest rates”, projecting a policy rate of around 0.75% by the end Private consumption Corporate Capex Export Import Government Spending GDP

of 2025, with 10-year government bond yields of just over 1%, in line with the general market
consensus. However, the long-term JGB yield could rise to as much as 1.5%, depending on the
policies implemented by the next U.S. government. Needless to say, should the incoming U.S.
Source: Cabinet Office, CBRE Research, November 2024.
president follow through on his campaign warnings to implement tariffs on all imported goods, the
adverse effects of this policy on the global economy would also present a risk on Japan’s economic
stability.

5 CBRE RESEARCH © 2024 CBRE, INC.

02

Investment
Sentiment among domestic investors and lenders was largely unchanged in 2024. Total commercial real estate
investment volume for the year is set to exceed last year’s figure, topping JPY 4 trillion by a large margin. While CBRE
expects investment volume to remain generally stable in 2025, this is predicated on only moderate increases in interest
rates. Should the BoJ hike rates at a faster-than-expected pace, purchasing activity could stagnate as investors
recalibrate their cap rate targets.
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Investment Market Summary

Investment volume set to increase y-o-y in 2024; similar volume expected in Figure 2-1: Interest rates
2025 1.5%
Total commercial real estate investment volume for 2024 (transactions of JPY 1 billion or more) is
expected to exceed the previous year’s figure (JPY 3.95 trillion) and top JPY 4 trillion by a large 1.0%
margin. If achieved, this would represent the first time that annual investment volume has
exceeded JPY 4 trillion since 2020. While short-term interest rates have increased on the back of 0.5%
the BoJ’s announcement in March that it was terminating its negative interest rate policy, followed
by its additional rate increase of July, long-term interest rates (10-year government bond yields) 0.0%
have remained stable at around 1% (Figure 2-1). This has ensured that domestic investors and
-0.5%
lenders maintained a positive stance toward real estate investment. Property sales by J-REITs and

2023.01

2023.07
2021.01

2021.07
2016.01

2016.07

2018.01

2018.07

2019.01

2019.07

2024.01

2024.07
2017.01

2017.07

2020.01

2020.07

2022.01

2022.07
several major real estate transactions related to business acquisitions also pushed up total
investment volume for the year.
3m TIBOR 10y JGB yield BoJ policy rate
Provided interest rate increases remain moderate in 2025, domestic investors and lenders are set
to maintain their proactive stance towards commercial real estate investment. Offices and hotels Source: Japanese Bankers Association, Macrobond, CBRE Research

should see robust activity due to their strong fundamentals, with a distinct possibility that several
very large transactions in the JPY hundreds of billions will be completed in 2025. Activity among J- Figure 2-2: Commercial real estate investment volume
REITs is likely to involve more portfolio overhauls, especially by entities that will find it difficult to
Forecast
raise capital due to weak share prices on the back of rising interest rates. However, major sales by 5,000 JPY bn 60%
J-REITs are set to decline in 2025. Among overseas investors, the stable fundamentals and liquidity
of Japanese real estate remain attractive attributes. As prices are adjusted in other Asia Pacific 4,000 40%

markets, however, some investors may become more selective towards their Japanese investments. 3,000 20%
Nevertheless, early reports of potential major transactions suggest the year could see an increase
in purchasing volume by overseas buyers. 2,000 0%

CBRE projects total investment volume in 2025 to remain largely unchanged from 2024 (Figure 2- 1,000 -20%
2). Should the BoJ hike rates more quickly than expected and long-term interest rates approach
the 1.5% mark, however, purchasing momentum could weaken as investors are forced to recalibrate 0 -40%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
their cap rate targets.
Transaction volume (LHS) Y-o-Y (RHS)
* Includes transactions of JPY 1 billion or larger, excluding acquisitions by J-REITs at IPO.
Source: MSCI Real Capital Analytics, CBRE Research, November 2024.

7 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Investment Market in 2024

Full-year investment volume rises 6% y-o-y as of Q3 2024; Figure 2-3: Investment volume by investor type
foreign investors remain net sellers but magnitude declines from 2023
6 JPY tn
CBRE projects that full-year commercial real estate investment volume for 2024 will top the JPY 4
5
trillion mark for the first time since 2020.
4
Cumulative commercial real estate investment volume for the year up to and including Q3 2024
3
(transactions of JPY 1 billion or more) grew 6.3% y-o-y to reach JPY 3.40 trillion. J-REITs and non-
J-REIT domestic investors were most active, logging investment volumes of JPY 1.02 trillion (up 2
15.6% y-o-y) and JPY 1.65 trillion (up 17.2% y-o-y), respectively. Foreign investment fell by 19.4% 1
over the same period to JPY 740 billion (Figure 2-3). 0

2020

2021

2022

2023

Q1- Q3 2024
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
While J-REIT acquisition volume for the first three quarters of 2024 (JPY 1.02 trillion) has already
emulated 2023’s full-year figure, sales by this cohort of investors has reached JPY 560 billion, up Domestic (J-REITs) Domestic (Others) Overseas
by 68.7% y-o-y. This volume outstrips the JPY 380 billion recorded in 2023 and is set to establish
* Includes transactions of JPY 1 billion or larger, excluding acquisitions by J-REITs at IPO.
an all-time annual record. Among non-J-REIT domestic investors, the most significant transactions Source: MSCI Real Capital Analytics, Source: CBRE Research, Q3 2024.
were the sale of a logistics portfolio by Logisteed (formerly Hitachi Transport System) along with
several major hotel and office transactions including those for the Aoyama Building, the Hilton
Fukuoka Sea Hawk, and Hoshino Resorts Tomamu. Figure 2-4: Overseas investors’ acquisition, sales, and net investment volume

Sales volume by overseas investors outstripped their acquisition volume in 2023; a trend that 2 JPY tn
continued into the first three quarters of 2024 (Figure 2-4). However, foreign net sales volume is
likely to narrow or even turn into a net purchase position for the full-year 2024, given the several 1
large acquisitions by overseas investors reported in Q4.
0

-1

-2

Q1-Q3 2024
2005
2006
2007
2008
2009

2020
2021
2022
2023
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Acquisition Sale Net investment (=Acquisition - Sale)
* Includes transactions of JPY 1 billion or larger
Source: MSCI Real Capital Analytics, CBRE Research, Q3 2024.

8 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Investment Market in 2024 (cont.)

Hotel investment volume to set new record for second straight year Figure 2-5: Investment volume breakdown by asset type
Hotels have been one of the most active sectors in 2024, largely due to strong purchasing by 100%
domestic investors. Cumulative investment volume in the hotel sector over the first three quarters
of 2024 reached JPY 710 billion, rising by 58.8% y-o-y and exceeding 2023’s full-year historical- 80%
high figure of JPY 570 billion. Hotel transactions accounted for 22% of total investment volume, 60%
well above the levels of previous years (Figure 2-5).
40%
Office investment volume was up by 27% over the same period to JPY 1.20 trillion, outstripping
2023’s full-year total of JPY 1.11 trillion. In addition to the sale of office assets by J-REITs and 20%
transactions by corporates, investors’ renewed appreciation of office sector fundamentals was a
0%
key factor in this resurgence. J-REITs’ cumulative office acquisition volume in the year to Q3 2024

Q1-Q3 2024
2005
2006
2007
2008
2009

2020
2021
2022
2023
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
reached JPY 270 billion, while cumulative sales set a new record of JPY 390 billion. Sales volume
was boosted by the disposal of major office properties by Nippon Building Fund and Sekisui House Office Retail Industrial Residential Hotel Others
Reit. As a result, full year sales volume by J-REITs is set to outstrip acquisition volume for the first * Includes transactions of JPY 1 billion or larger, excluding acquisitions by J-REITs at IPO.
time since CBRE’s survey began in 2005 (Figure 2-6). Source: MSCI Real Capital Analytics, CBRE Research, Q3 2024.

Cumulative investment volume in the logistics sector for the first three quarters of 2024 fell 6.2% y-
o-y to JPY 690 billion. While some acquisitions were completed by overseas investors, investment Figure 2-6: J-REIT office acquisition and sales volume
volume declined due to the absence of public stock offerings by logistics REITs. The year was also
notable for the number of transactions of data centers by foreign investors. In addition to foreign 0.8 JPY tn

purchases of land for data center development, some Singapore-based listed REITs acquired data 0.6
centers in Tokyo and Osaka. Increased investment by major global IT companies in the fields of 0.4
generative AI and cloud services in Japan have rekindled interest in data centers as investment 0.2
targets. 0.0
-0.2
-0.4
-0.6

Q1-Q3 2024
2005
2006
2007
2008
2009

2020
2021
2022
2023
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
J-REIT office acquisition J-REIT office sale
* Includes all transactions, including those below JPY 1 billion.
Source: CBRE Research, Q3 2024.

9 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Outlook for 2025

Interest rates: Moderate rise anticipated Figure 2-7: Investor’s outlook for long-term interest rates for the next 12 months
Japan commercial real estate investment volume in 2025 is projected to remain largely unchanged 50%
from 2024. This forecast is based on the most likely interest rate scenario, with the market
consensus expecting a moderate interest rate hike. This would mean a policy interest rate in the 40%
vicinity of 0.75% as of the end of 2025, and 10-year government bond yields of just over 1%.
According to the results of CBRE’s June and September investor surveys carried out just before 30%
and after the BoJ’s additional interest rate hike was announced in July, approximately 40% of
20%
respondents anticipate long-term interest rates at the end of 2025 to fall in the 1.00% to 1.25%
bracket (Figure 2-7). The fact that these results remained largely unchanged across the two 10%
surveys indicates that the BoJ’s interest rate hike in July did not have a strong effect on real estate
investors’ projections for future rates. The results of Japan’s general election in October, in which 0%
the ruling coalition failed to capture an outright majority, make it much more likely that an below 0.5% 0.5-0.75% 0.75-1.0% 1.0-1.25% 1.25-1.5% 1.5-1.75% 1.75-2.0% 2.0% or
above
Abenomics-style policy will need to be maintained. Many market participants appear to believe that, 2024.June 2024.Sep
while long-term interest rates will continue to rise slowly as a result of the BoJ tapering its Source: CBRE Cap Rate Survey, September 2024.
government bond purchases, it is unlikely that the BoJ will adopt an aggressive monetary
tightening policy.
Figure 2-8: Loans outstanding to the real estate sector
(total of domestically licensed banks, Shinkin banks and other financial institutions)
Lenders’ attitudes: Financing environment to remain generally accommodative
140 JPY tn JPY tn 16
Even after the BoJ terminated its negative interest rate policy, lender attitudes have remained
120 14
largely accommodative. In CBRE’s Lender Survey, an annual survey of financial institutions
100 12
providing financing for real estate investment carried out in May of this year, 60% of both senior 10
and mezzanine lenders indicated that they expected loan volume in fiscal year 2024 to exceed that 80
8
of 2023 (see “Lender Survey 2024”, July 2024). According to BoJ data, outstanding real estate loan 60
6
volume by Japanese financial institutions (domestic banks, Shinkin banks, and other financial 40 4
institutions) reached JPY 131 trillion as of the end of September 2024, and continues to grow 20 2
(Figure 2-8). While the three-month TIBOR is rising on the back of the BoJ’s interest rate hike in 0 0

2014.06

2015.06
2012.06

2023.06
2017.12

2020.12
2021.06

2022.12
2013.06

2014.12

2015.12
2016.06

2018.06

2019.06

2023.12
2010.12
2011.06

2012.12

2021.12
2013.12

2016.12

2018.12

2019.12

2024.06
2011.12

2017.06

2020.06

2022.06
July and anticipated additional hikes, lenders are likely to remain accommodative in 2025, unless
policy rates are raised at a pace exceeding expectations.
Loans outstanding to the real estate sector Of which, loans to SPCs (RHS)
Source: Bank of Japan, Macrobond, CBRE Research, November 2024.

10 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Outlook for 2025 (cont.)

Yields: Unchanged, but with only limited scope for yield spreads to tighten Figure 2-9: Estimated prime asset yields
CBRE’s latest quarterly investor cap rate survey found that expected NOI yields maintained record 6%
low levels throughout 2024 for all major asset types other than logistics facilities. The effects of
interest rate hikes have therefore largely been absorbed by narrowing yield spreads in 2024. 5%
However, yield spreads are already approaching the tightest levels seen just prior to the 2007
Global Financial Crisis, meaning that there appears to be a limit to how much further they can
4%
shrink. CBRE projects Tokyo prime asset yields to rise slightly for logistics facilities by Q4 2025,
and to remain unchanged or decline slightly for offices and retail, for which cashflow improvements
3%
can be expected (Figure 2-9). Considering how limited the scope for yield spread contraction is, 3.45
however, any increase in long-term interest rates above the market consensus could lead to 2.30
2% 2.75
investors adjusting their cap rate targets, leading to the subsequent stagnation of the real estate Office Logistics faclities Retail facilities
investment market. (Central 5 wards, Grade A) (Multi-tenant, Tokyo Bay area) (Ginza high-street)
Q1 2007-Q3 2024 Q3 2024 Q4 2025 Forecast
Investor appetite: Foreign investors may become more selective Source: CBRE Research, Q3 2024.
Should the most likely interest rate scenario play out, appetite among investors for commercial real
estate should remain robust in 2025. Being unlikely to be able to raise equity to engage in large-
Figure 2-10: Estimated prime office yield spreads in major cities
scale acquisitions, J-REITs will continue to reshuffle asset portfolios. However, having already sold
most of their major properties in 2024, and with more J-REITs using the proceeds from asset sales 8%
to buy back shares, J-REIT acquisition volume could decline. Investment activity by non-J-REIT
domestic investors are likely to be driven by corporates executing real estate strategies and those 6%
related to business acquisitions. These would include purchasing by infrastructure-related
companies, many of which are prioritizing the expansion of their real estate businesses. As real
4%
estate prices have adjusted in many Asian and other overseas cities, the relative appeal of
Japanese yield spreads to foreign investors is fading (Figure 2-10). While it is unlikely that foreign
2%
investors will reduce their presence in Japan, they may become more selective towards the sector
and the individual properties in which they choose to invest.
0%
Shanghai Manhattan Sydney Tokyo Seoul Singapore Hong Kong London
Spread Prime office cap rate 10-y government bond yield
* Spread between estimated prime office yields and 10-year government bonds
Source: CBRE Research, Q3 2024.

11 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

02 Investment

Outlook for 2025 (cont.)

Asset types: Hotels to remain active; major deals to push up office volume Figure 2-11: Rental forecast for major asset types (y-o-y change)
Investor appetite for offices should continue to recover as fundamentals strengthen. While office
6%
rental increases in Tokyo may slow in 2025 due to relatively abundant new supply, average rents
should continue to trend upward (Figure 2-11). Negotiations for the sale of multiple large-scale 4%
office properties including Tokyo Garden Terrace Kioicho, which should command several hundred
billion yen each, are ongoing. If these deals come to fruition, they would represent the largest 2%
individual transactions since the sale of Otemachi Place in 2022 (roughly JPY 430 billion) and 0%
would drive up office investment volume. The hotel sector remains popular with both domestic and
foreign investors, backed by strong demand from foreign tourists. When asked by CBRE’s -2%
September investor survey for their opinions regarding the future direction of transaction prices,
-4%
some 65% of respondents indicated that they felt the hotel sector would stay in the Office Logistics facilities Retail facilities
“recovery/boom” phase, well above the figures for other sectors (Figure 2-12). With some J-REITs (Central 5 wards, Grade A) (Multi-tenant, Greater Tokyo) (Ginza high-street)
planning entry into the hotel market for the first time, investment volume in the sector should 2022 2023 2024 Forecast 2025 Forecast
remain elevated in 2025. Source: CBRE Research, Q3 2024.

As with hotels, urban retail facilities are reaping the benefits of a weak yen and a rise in foreign
tourist numbers, with high street rents set to continue increasing in 2025. Although sales of high- Figure 2-12: Market cycle by asset type (transaction prices; Tokyo/ Greater Tokyo)
street properties are rare, investor interest is high, and there is a possibility that transactions may
become more common. While investors in the residential sector remain selective, this asset class 100%
continues to offer abundant liquidity due to its broad investor base. The sector will continue to
attract foreign investors for the upside it offers in terms of tenant turnover and value-add 80%
initiatives. 60%

Logistics facilities is the only sector for which rents are projected to fall in Greater Tokyo in 2025. It 40%
was also the lone sector for which a significant number of respondents to CBRE’s September 20%
investor survey indicated that they expected transaction prices to fall into the “slow
0%
down/recession” phase next year. Combined with last year’s high base of comparison resulting Present One year Present One year Present One year Present One year Present One year
from major transactions related to a business acquisition, investment volume is likely to decrease in ahead ahead ahead ahead ahead
Large-scale Office Studio-type Urban retail facility Hotel Multi-tenant
2025. However, rents are increasing in all regions other than Greater Tokyo and construction costs (n=68) rental apartment (n=57) (leasing-contract) logistics facility
are rising, meaning that the supply-demand balance for logistics facilities looks certain to tighten in (n=61) (n=54) (n=54)
Recovery/Boom Peak Slow-down/Recession
the long-term. Selective investment in logistics facilities should therefore continue, particularly in
Source: CBRE Cap Rate Survey, September 2024.
regional areas. Data center transactions are also expected to pick up as investors seek to exit from
development projects.

12 CBRE RESEARCH © 2024 CBRE, INC.

03

Office
The trend for occupiers to upgrade their office working environments to attract and retain employees continued in
2024, pushing up office rents in almost all cities. With demand expected to stay robust, the polarization of office rents
based on factors such as building location and age should become even more pronounced. Vacancy rates are likely to
be heavily influenced by new supply, with rents increasing in cities set to witness the addition of new stock at or below
previous average levels.
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Office Market Summary

Tenants to become more selective despite robust upgrading demand Figure 3-1: Risk factor for future business operations
The trend for occupiers to upgrade their office working environments to attract and retain staff Attracting & retaining talents 85.3%
continued in 2024. According to CBRE’s latest office occupier survey, the most-selected risk factor
Rising cost (Other) 46.3%
for future business operations is securing human resources (Figure 3-1). With the unemployment
Economic uncertainty 41.2%
rate remaining at historically low levels, corporations are struggling to fill vacant positions. As a
Rising labor costs 39.0%
result, some 40% of survey respondents indicated that they planned to increase investment in
Energy price fluctuations 33.8%
improving their office environments, well above the 5% that planned to reduce spending (Figure 3-
Business continuity risk due to
2). According to the Japan Policy Research Institute’s Financial Statements Statistics of natural disasters and pandemics 30.9%
Corporations collated from April to June of 2024, operating profits and corporate internal reserves Changes in employee and personnel preferences 29.4%
recorded all-time quarterly highs across all industries. CBRE expects an increasing number of Trends in foreign exchange and interest rates 25.7%
companies to divert funds to improving their office environments as part of their investment in Adaptation to technology 25.0%
human resources. Facility obsolescence 23.5%
Strengthening of laws and regulations 20.6%
The Tokyo All-Grade vacancy rate dropped for a fourth consecutive quarter in Q3 2024, as
vacancies were steadily filled in newer buildings. However, vacancies are starting to arise in Environmental Issues 18.4%
buildings in less desirable locations or with inferior facilities. The average annual supply for the Geopolitical risk 17.6%
three years after 2025 is slated to fall slightly below previous average levels, and the vacancy rate Other 0.7%
n=136
is projected to remain between 3% and 4%, although some polarization will be witnessed based on 0% 20% 40% 60% 80% 100%
individual buildings’ attributes. While record high new supply of 86,000 tsubo came on stream in Source: Events and Planning Unit, Nikkei Inc./ Investigation: Nikkei Research Inc.
Osaka in 2024, the addition of new stock stimulated latent demand, with vacancies steadily filled Cooperation for investigation: CBRE "Survey on office usage", July 2024.

and the vacancy rate remaining just above 3% as of the end of Q3 2024. Even with further major
Figure 3-2: Planned investment in future office improvements
supply in the near-term pipeline, robust demand should ensure that the supply-demand balance in
this market does not loosen significantly. Fukuoka is slated to see the largest amount of future
supply as a percentage of the existing stock of any city in the country, although redevelopment
and refurbishment works should stimulate relocation demand, ensuring rise in the vacancy rate is 39.7% 41.9% 13.2% 5.1%
likely to be limited. While demand remains generally strong in all other cities, new supply as a
proportion of stock is likely to be the decisive factor in determining fluctuations in the vacancy rate.
0% 20% 40% 60% 80% 100%
Assumed achievable rents are on the rise in most cities as tenants take on a higher rental burden
as they relocate to superior buildings. In cities such as Tokyo, Sendai, Kyoto, and Kobe, where n=136 Increase No change Undecided Reduce
future supply is projected to be at or below previous average levels, rents are likely to continue
Source: Events and Planning Unit, Nikkei Inc./ Investigation: Nikkei Research Inc.
rising. Cooperation for investigation: CBRE "Survey on office usage", July 2024.

14 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Tokyo
Market remains polarized Figure 3-3 : All-grade vacancy rate, vacancy rate for existing facilities,
The Tokyo All-Grade vacancy rate dropped for the fourth consecutive quarter in Q3 2024, reaching and assumed achievable rents in Tokyo
8% JPY/tsubo 28,000
4.0%. This represented a drop of 1.2 pp. y-o-y (Figure 3-3). Over the course of the year, vacancies
26,000
were absorbed by companies from a wide variety of industries expanding or moving to new 6%
premises in superior locations or higher-grade buildings to improve talent attraction and retention. 24,000
Significant vacancies in Grade A buildings completed in 2023 were filled, pushing up the average 4.0%
4% 22,000
occupancy rate among these properties from around 60% in Q4 2023 to 80% in Q3 2024. Surging
21,620 20,000
relocation construction costs and delays to the completion of new projects in 2023 meant that new 3.3%
2%
building rents were considerably higher than those for existing buildings, with most companies 18,000
opting to fill vacancies in older properties. However, as the vacancy rate for existing facilities
0% 16,000
(facilities at least one year old) fell to below 4% by Q4 2023, tenants had fewer options for

Q3 2008

Q3 2009

Q3 2010

Q3 2011

Q3 2012

Q3 2013

Q3 2014

Q3 2015

Q3 2016

Q3 2017

Q3 2018

Q3 2019
Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q1 2014

Q1 2015

Q1 2016

Q1 2017

Q1 2018

Q1 2019

Q3 2020

Q3 2021

Q3 2022

Q3 2023

Q3 2024
Q1 2020

Q1 2021

Q1 2022

Q1 2023

Q1 2024
relocation. More tenants committed to stepping up investment in their office environment, even at
higher costs, have led to the absorption of vacancies in new properties. All-Grade Vacancy Rate All-Grade Vacancy Rate for existing office buildings All-Grade Assumed Achievable Rent (RHS)

Assumed achievable rents rose across all grades for the fourth consecutive quarter in Q3 2024, Source: CBRE Research, Q3 2024.

with Grade A rents increasing by 3.5% over the past year. The vacancy rate for Grade A buildings
completed in or before 2022, which comprise 90% of all properties in the grade, fell to the Figure 3-4 : Tokyo all-grade vacancy rates in core and non-core areas
historically low level of 1.2% in Q3 2024. With very few buildings now having major vacancies, rents
that fell during the pandemic are now being raised. Rents for other building grades are also rising, 10%
particularly in buildings where vacancies have recently been filled.
8%
Several secondary vacancies have recently appeared in buildings with inferior transport access or
6% 7.0%
facilities, and are taking some time to fill. This trend is particularly noticeable among older
buildings in suburban and coastal areas. While the All-Grade vacancy rate for the core area of 4%
Tokyo was just 3.3% in Q3 2024, the figure for the non-core area was significantly higher at 7.0% 3.3%
2%
(Figure 3-4). Landlords of buildings in the non-core area are also struggling to raise rents as
quickly as those in the core area. 0% Q4 2008

Q4 2009

Q4 2010

Q4 2011

Q4 2012

Q4 2013

Q4 2014

Q4 2015

Q4 2016

Q4 2017

Q4 2018

Q4 2019
Q2 2020

Q2 2021

Q2 2022

Q2 2023

Q2 2024
Q2 2008

Q2 2009

Q2 2010

Q2 2011

Q2 2012

Q2 2013

Q2 2014

Q2 2015

Q2 2016

Q2 2017

Q2 2018

Q2 2019

Q4 2020

Q4 2021

Q4 2022

Q4 2023
Core areas (Mainly central 5 wards) Non-core areas (Mainly other 18 wards)
Source: CBRE Research, Q3 2024.

15 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Tokyo (cont.)
All-Grade vacancy rate projected to remain just above 3% until end of 2027 Figure 3-5: New supply and vacancy rates in Greater Tokyo
CBRE expects market polarization to become more pronounced in 2025. In addition to fundamental Forecast
300,000 tsubo 12%
factors such as transport convenience, employee comfort, and disaster resilience, tenants are
increasingly prioritizing other criteria when selecting an office. These include the provision of
common spaces with lounges and other amenities, the local environment, and the availability of 250,000 10%
convenient additional services. Demand for improving office environments is now spreading to
encompass companies of all sizes and sectors.
200,000 8%
With availability in high-quality buildings capable of providing these desired environments getting
fewer, tenants are turning their attention toward future supply. While annual supply over the next
150,000 6%
three years (until 2027) is slated to average 162,000 tsubo, slightly below the past yearly average
of 173,000, approximately 60% of new stock consists of Grade A buildings in the core area of Tokyo. 4.2%
With the absorption of vacant units expected to be strong, CBRE projects the All-Grade vacancy 100,000 4%
rate to remain unchanged at between 3% and 4% until the end of 2027. However, the 3.4%
3.2%
competitiveness of individual buildings in terms of factors such as location and grade will be key to 50,000 2%
determining their success in the rental market. 2.0%
With no new supply in Q4 2024, the Grade A vacancy rate is projected to slip by 0.7 pp. q-o-q to 0 0%
4.3%. However, several latent Grade A vacancies are set to arise in the coming quarters as the

2008
2009

2020
2021
2022
2023
2024
2025
2026
2027
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
result of tenants making applications to terminate their leases or downsize, which are likely to
materialize in vacancy figures in the coming quarters. New Grade A supply of around 120,000
Grade A New Supply Other New Supply
tsubo per annum is slated for both 2025 and 2026, a figure approximately 20% above previous
Grade A Vacancy Rate (RHS) Grade A-minus Vacancy Rate (RHS)
averages. The bulk of new supply in both years will be concentrated in the January-March quarter.
As of the end of September 2024, the average pre-leasing rate for new buildings due for Grade B Vacancy Rate (RHS) All-Grade Vacancy Rate (RHS)
completion in 2025 was estimated at just under 70%, suggesting that some of these buildings may
come on stream at less than full occupancy. These factors are likely to temporarily push up
vacancy rates, with CBRE projecting small spikes to 4.6% in both Q1 2025 and Q1 2026, before they Source: CBRE Research, Q3 2024.

fall again. By Q4 2027, the vacancy rate is projected to drop to as low as 2.0%, down 3.0 pp. from
the Q3 2024 figure, and the lowest of all three grades (Figure 3-5).

16 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Tokyo (cont.)
Grade A-minus buildings are likely to experience the strongest impact from the addition of new Figure 3-6: Assumed achievable rents in Tokyo
Grade A supply, with secondary vacancies appearing in buildings with inferior access or facilities, Forecast
which are particularly likely to become long-term vacancies in non-core areas. For this reason, 50,000 JPY/tsubo
CBRE projects the Grade A-minus vacancy rate to stay above 4% from H2 2026 through until the
end of 2027, which would be the highest level among all grades. The vacancy rate in Q4 2027 is 45,000
projected to be 4.2%, unchanged from its current level. In the Grade B segment, secondary
vacancies are expected to appear in less competitive buildings due to the addition of new supply. 40,000
37,200
Compared to the Grade A-minus category, non-core area properties make up a smaller percentage
of total stock, meaning that vacancies should continue to be filled in relatively new and centrally 35,000
located buildings. The Grade B vacancy rate is projected to rise by 0.5 pp. from Q3 2024 to reach
3.2% in Q4 2027, only just above that of Grade A (Figure 3-5). 30,000

Rents to continue rising before reaching temporary plateau in H2 2025 24,800

25,000
Rents should continue to rise steadily across all grades, although vacancies in buildings lacking a 22,500
competitive advantage are likely to increase as the market becomes more polarized. The 20,000 22,260
concentration of new supply in Q1 2025 and Q1 2026 is also likely to increase downward pressure
on rents. For this reason, CBRE projects rents to plateau from the H2 2025 and on into 2026. 15,000
However, rents should resume their upward trend thereafter, with CBRE forecasting achievable

2008
2009

2020
2021
2022
2023
2024
2025
2026
2027
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
rents at the end of 2027 to reach JPY 37,200 per tsubo for Grade A, JPY 24,800 for Grade A-minus,
and JPY 22,500 for Grade B, up by 4.1%, 3.1% and 3.2%, respectively, from Q3 2024 figures (Figure
3-6).
Grade A Grade A-minus Grade B All-Grade
Several buildings originally slated for completion from 2025 onward are experiencing delays, with
the rising cost of construction materials, schedule delays, and labor shortages potentially pushing
back the completion dates for several buildings. This would result in a tighter supply-demand
balance than anticipated, potentially driving up rents still further. Source: CBRE Research, Q3 2024.

17 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Osaka
Robust demand ensures rents remain stable even as vacancy rate rises slightly Figure 3-7: New supply and vacancy rates in Osaka
New supply for 2024 reached a record high 86,000 tsubo. Some 41,000 tsubo, almost half of this Forecast
100,000 tsubo 15%
figure, came on stream in the Grade A segment by the end of Q3 2024, pushing up the grade’s
vacancy rate by 3.2 pp. from Q4 2023’s level to 5.6%. Tenant demand remained robust, leading to 90,000
the steady absorption of vacancies in all grades. All-Grade net absorption had reached 43,000
80,000 12%
tsubo by Q3 2024, with data suggesting that net absorption for 2024 is likely to set a new single-
year record. The drivers of relocation demand tend to be forward-thinking, with tenants citing new 70,000
office openings, expansions, and locational improvements for units of all sizes. New buildings are
60,000 9%
frequently being selected by companies moving from self-owned premises to improve office
environments. 50,000

A further 54,000 tsubo of new Grade A stock is slated to be completed by Q4 2025, equivalent to 40,000 6%
14% of existing Grade A stock as of Q3 2024. With secondary vacancies anticipated to arise in 5.1%
30,000
buildings in inferior locations or with inferior facilities, the vacancy rate should continue to climb, 3.5%
reaching 7.5% by Q4 2025. As new supply from 2026 onward is scheduled to be limited, the 20,000 3%
3.0%
vacancy rate should begin to decline again thereafter (Figure 3-7). 10,000
Future Grade B supply is extremely limited, with the projected total for the three years between 0 0%
2025 and 2027 only reaching 13,000 tsubo, roughly equivalent to the past single-year average.

2020

2021

2022

2023

2024

2025

2026

2027
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
While some secondary vacancies are likely to emerge due to tenants’ relocations to Grade A
buildings, strong occupier demand for in-house expansions or relocations to larger premises should
Grade A New Supply New Supply - other than Grade A
ensure that any increase in the vacancy rate is minimal. CBRE projects the Grade B vacancy rate to
Grade A Vacancy Rate (RHS) Grade B Vacancy Rate (RHS)
increase by 0.4 pp. between Q3 2024 and Q4 2027 to reach 3.0% (Figure 3-7).
All-Grade Vacancy Rate (RHS)

Source: CBRE Research, Q3 2024.

18 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Osaka (cont.)
All-Grade achievable rents have been steadily but slowly rising since Q4 2023. Robust demand has Figure 3-8: Assumed achievable rents in Osaka
prompted landlords of buildings previously commanding below-market rents to push up their rents, Forecast
leading to slight rises for both Grade A and Grade B rents in 2024. However, both grades are likely 29,000 JPY/tsubo

to see rents adjusted downward between now and H1 2027 mainly in: buildings with secondary 27,000
vacancies; older buildings with inferior facilities; and/or buildings in less desirable locations.
However, strong demand should ensure any rent changes are minimal. Once new supply eases and 25,000 23,850
the vacancy rate stabilizes at a low level in H2 2027, rents should begin to rise once more. CBRE 23,000
forecasts achievable rents at the end of 2027 to stand at JPY 14,100 per tsubo for All-Grade, JPY
23,850 for Grade A, and JPY 14,550 for Grade B, representing declines from the Q3 2024 figures of 21,000
1.2%, 0.8% and 1.0%, respectively (Figure 3-8). 19,000

17,000

15,000 14,550
13,000 14,100
11,000

9,000

2008
2009

2020
2021
2022
2023
2024
2025
2026
2027
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Grade A Grade B All-Grade

Source: CBRE Research, Q3 2024.

19 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Nagoya
Grade A vacancy rate falls despite tenants becoming more selective Figure 3-9: New supply and vacancy rates in Nagoya
The Grade A vacancy rate fell for a second straight quarter to reach 4.4% in Q3 2024, well down Forecast
50,000 tsubo 15%
from the 8.8% recorded in Q1 2024. The period saw vacancies absorbed by tenants including IT
companies moving to new premises in higher-grade buildings, relocating from suburban locations, 40,000 12%
and expanding their office space. Despite struggling to fill units due to surging construction costs
30,000 9%
and construction delays, new buildings have begun to steadily improve their occupancy rates on
5.8%
the back of an increasing number of tenants raising their relocation budgets to secure units in 20,000 6%
superior buildings. The Grade B vacancy rate has now dropped for four consecutive quarters, 5.2%
reaching 4.2% in Q3 2024 amid strong demand from companies of all sizes from a wide variety of 10,000 5.1% 3%
sectors. At the same time, tenants are becoming more selective, with vacancies taking longer to fill 0 0%
in buildings in less desirable locations or with inferior facilities.

2020

2021

2022

2023

2024

2025

2026

2027
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
With no new Grade A supply planned for 2025, existing vacancies should continue to be filled, Grade A New Supply New Supply - other than Grade A Grade A Vacancy Rate (RHS)
pulling down the vacancy rate to 2.8% by Q4 2025. 2026 is slated to see the addition of 22,000 Grade B Vacancy Rate (RHS) All-Grade Vacancy Rate (RHS)
tsubo of new Grade A supply, equivalent to 13% of existing stock. The vacancy rate is forecast to Source: CBRE Research, Q3 2024.

rise to 6.5% by Q4 2026, before beginning to fall again in 2027, when no new supply is planned.
New Grade B supply between now and the end of 2027 is slated to consist of just 15,000 tsubo. Figure 3-10: Assumed achievable rents in Nagoya
Amid robust demand for medium-sized buildings, the vacancy rate should continue to fall, with
CBRE projecting a drop to 3.7% in Q4 2025. New Grade A supply is likely to create secondary Forecast
30,000 JPY/tsubo
vacancies in less competitive buildings, pushing the vacancy rate back up to 5.7% by Q2 2027
27,000
(Figure 3-9). 27,100
24,000
Although rents are currently rising steadily across all grades, new supply in 2026 and the 21,000
subsequent creation of secondary vacancies should ensure rents reach a plateau or potentially 18,000
even undergo a minor decline from 2026 to 2027. CBRE forecasts achievable rents to fall slightly 14,450
15,000
between Q3 2024 and Q4 2027, edging down by 0.7% to JPY 27,100 for Grade A, and by 0.3% to
JPY 14,450 for Grade B office buildings (Figure 3-10).
12,000 13,960
9,000 2008
2009

2020
2021
2022
2023
2024
2025
2026
2027
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Grade A Grade B All-Grade
Source: CBRE Research, Q3 2024.

20 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Regional cities
New supply set to determine vacancy rates amid consistently robust demand Figure 3-11: New supply as a percentage of Q3 2024 stock (all-grade)
Vacancy rates in cities with no new supply declined steadily in 2024, while markets with new office 15%
buildings managed to keep any vacancy rate increases minimal. Office demand in regional cities 4.6%
has rebounded strongly from pandemic-era lows, with relocation activity observed nationwide from 12%
6.4%
companies looking for higher-grade or better-situated offices, as well as those looking to expand 6.5%
9% 1.0%
their floor space. Assumed achievable rents increased between Q4 2023 and Q3 2024 for all cities 1.4%
other than Kanazawa as landlords steadily hiked below-market rents. 6% 1.0% 3.9%
0.4% 3.7% 2.7% 8.4%
2.1% 1.1%
New supply should continue to exert the most significant influence on the vacancy rate. In terms of 3% 2.1% 4.7% 0.7% 4.2%
2.5% 2.5% 2.8% 4.0%
the ratio of new supply over the next three years (until 2027) to existing stock (hereafter referred 0.1% 2.0% 0.4% 0.2% 0.2% 2.3% 1.9% 1.0%
0% 0.8% 0.7%
to as “new supply ratio”), the city with the highest figure nationwide is Fukuoka, with 14% (Figure 3-

Sendai
Osaka

Hiroshima
Kobe

Fukuoka
Nagoya

Saitama

Kanazawa

Kyoto
Tokyo

Sapporo

Takamatsu
Yokohama
11). As major construction continues for the “Tenjin Big Bang” and “Hakata Connected” city center
redevelopment projects, the vacancy rate in Fukuoka should increase by 4.5 pp. from its current
level to reach 8.3% by the end of 2027. The second-highest new supply ratio is set to be recorded 2024Q4 2025 2026 2027
by Hiroshima, with 13%. Even though the city is due to witness the addition of its highest ever level Source: CBRE Research, Q3 2024.

of new supply in 2025, the vacancy rate is only forecast to rise by 2.8 pp. to 6.2% by Q4 2027. In
Yokohama, several major corporate relocations from outside the city have absorbed vacancies, with Figure 3-12: All-grade vacancy rate projections (Q3 2024 to Q4 2027)
demand continuing to increase. This has kept secondary vacancies to a minimum, which should
stop the vacancy rate from rising sharply in the future. While the vacancy rate in Sapporo is likely
to rise temporarily as new supply comes on stream, the fact that new stock is centrally located 15%
means that tenant demand is strong and any rises in vacancy should be minimal. In Sendai, 12%
Kanazawa, Kobe, and Takamatsu, where the new supply ratio is low, available units should be
9%
steadily filled in existing buildings, gradually lowering vacancy rates (Figure 3-12).
6%

3%

0%

Sendai
Osaka

Hiroshima
Kobe

Fukuoka
Nagoya

Saitama

Kanazawa

Kyoto
Tokyo

Sapporo

Takamatsu
Yokohama
Q3 2024 - Q4 2027 Q3 2024 Q4 2027
Source: CBRE Research, Q3 2024.

21 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

03 Office

Regional cities (cont.)

Rents forecast to rise or remain largely unchanged in most cities Figure 3-13: All-grade achievable rent projections (Q3 2024 to Q4 2027, indexed)
Assumed achievable rents for Q4 2027 are projected to fall from Q3 2024 levels in five of the 10 Q3 2024 =100
cities surveyed by CBRE and rise in the remaining five. In Sendai, Kyoto, and Kobe, where vacancy 105
rates are projected to either fall or remain low, rents should continue to rise moderately. In Fukuoka,
although landlords of properties that are underpriced for their location or facility levels are set to
hike rents, some secondary vacancies will be generated by new supply. Owners of properties
forced to compete with new or upcoming buildings in terms of location, size, or facilities are likely
100
to need to lower rents to secure tenants quickly. While the new supply ratio in Hiroshima is high,
any rent recalibrations will be kept to a minimum as new office properties are spread across a wide
geographical area. Relocations to higher-grade buildings to attract and retain employees continue
to be widely observed and should remain a key trend, ensuring rents either rise or remain largely
unchanged in most cities (Figure 3-13). 95

90

Sendai

Hiroshima
Osaka

Kobe

Fukuoka
Nagoya

Saitama

Kanazawa

Kyoto
Sapporo
Tokyo

Takamatsu
Yokohama
Q3 2024 - Q4 2027 Q4 2027

Source: CBRE Research, Q3 2024.

22 CBRE RESEARCH © 2024 CBRE, INC.

04

Logistics
While the Greater Tokyo vacancy rate may remain high in 2025, the vacancy rates for Greater Osaka, Greater Nagoya,
and Greater Fukuoka should either remain low or decline slightly. The regional diversification of logistics facilities in
response to the “2024 problem” has led to a situation in which the outlook differs significantly by area. However, with
nationwide net absorption forecasted to reach around 1 million tsubo per annum in the coming years, Japan’s LMT
logistics market is certain to continue to expand.
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Logistics Market Summary

Nationwide net absorption reaches just under 1 million tsubo, Figure 4-1: Japan LMT vacancy rates
while level of new supply also remains high Forecast
20%
Vacancy rates for Large Multi-Tenant (LMT) logistics facilities in Q4 2024 are projected to rise y-
o-y for the Greater Tokyo and Greater Nagoya areas and fall y-o-y for Greater Osaka and Greater
Fukuoka (Figure 4-1). Rents have fallen slightly in Tokyo but are expected to increase in the other
15% 12.6%
three major cities (Figure 4-2). 8.8%
10%
The LMT vacancy rate in the Greater Tokyo area is projected to reach 9.7% by Q4 2024, the 9.7% 8.3%
highest level since 2010. While net absorption should exceed 500,000 tsubo for the full year, an 4.5% 5.3%
5%
increasing number of properties are reporting vacancies more than a year after completion. With
abundant supply slated for the Ken-O-do area in 2025, the vacancy rate for the entire Greater 3.3% 3.3%
Tokyo area may again exceed 10%. However, the expected decline in new supply in the Ken-O-do 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
area in 2026 along with the completion of new stock in the Gaikando area, where demand remains
robust, have led CBRE to project a pullback in the vacancy rate to just above 8%. Greater Tokyo Greater Osaka Greater Nagoya Greater Fukuoka
Source: CBRE Research, Q3 2024.
Despite the robust supply pipeline schedule for the next two years in Greater Osaka, Greater
Nagoya, and Greater Fukuoka, the vacancy rates in these three markets are expected to remain low
or fall slightly by Q4 2026. This is largely a result of a wider distribution of warehouses throughout Figure 4-2: Effective rent indices
the country due to logistics network recalibrations implemented in response to the so-called “2024 Forecast
problem”, caused by the introduction of new labor laws limiting truck drivers’ working hours. While 5,000 JPY/tsubo
4,500 4,440
most companies began the development of their logistics networks by focusing primarily on the 4,500
Greater Tokyo region in terms of both the quality and quantity of their logistics bases, the
4,220 4,330
transition to LMT development in other regions has triggered strong demand from users 4,000 3,740
3,670
nationwide. Robust activity is also being observed from the manufacturing sector around areas of 3,500
industrial concentration. 3,510 3,630
3,000
Full-year nationwide net absorption for 2024 is expected to reach 910,000 tsubo. CBRE expects
annual net absorption to continue to log around 1 million tsubo in the coming years as the LMT 2,500
market expands. However, with abundant supply enabling occupiers to adopt a selective attitude
2,000
towards their decision making, developers continue to pay heed to the specific needs of their 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
prospective customers. Greater Tokyo Greater Osaka Greater Nagoya Greater Fukuoka
Source: CBRE Research, Q3 2024.

24 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Greater Tokyo Area

Vacancy rate set to rise in 2025 before falling in 2026 Figure 4-3: Greater Tokyo supply-demand balance and vacancy rate
The Greater Tokyo LMT vacancy rate reached 10.1% in Q3 2024, up 0.8 pp. from the 9.3% recorded Forecast
1,000,000 tsubo 10%
at the end of 2023. This represented the first time that the vacancy rate had exceeded 10% since
Q4 2010. The rise in vacancy came despite the new supply in 2024 totaling just 588,000 tsubo, 800,000
9.7% 8%
some 300,000 tsubo below 2023’s level (Figure 4-3). The vacancy rate for buildings at least one 8.3%
year old rose to 6.1% in Q3 2024, up from 2.7% at the end of 2023, amid prolonged vacancy in an 600,000 6%
increasing number of units.
400,000 4%
Net absorption remained steady, recording a quarterly average of 145,000 tsubo in the first three
quarters of 2024. This eclipsed the quarterly average of 141,000 registered over the five years 200,000 2%
between 2019 and 2023, and looks set to ensure the full-year total reaches above 500,000 tsubo.
Properties fitted with rampways continue to report high occupancy rates and accounted for 80% of 0 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
all net absorption over the first three quarters of 2024. These properties are popular due to their
higher number of truck berths, which can improve transportation efficiency. Several major lease New Supply Net Absorption Vacancy Rate
contracts have been signed in such properties this year by major e-commerce operators and Source: CBRE Research, Q3 2024.

logistics providers. Elsewhere, interest has been observed from companies in the manufacturing
and retail sectors. Other firms have elected to use rental properties while their own logistics Figure 4-4: Greater Tokyo pre-leasing rate for buildings due for completion within
facilities are either refurbished or expanded. the next 12 months
Despite solid net absorption, pre-leasing of new properties continues to take time, with the pre- 60%
leasing rate for buildings due for completion within the next 12 months standing at just 21% in Q3 50%
2023 year-to-date (Figure 4-4). Total vacant floor space in Greater Tokyo currently stands at
40%
689,000 tsubo, one of the highest figures on record. Slow pre-leasing is due to the addition of new
supply in regions with existing buildings already carrying significant vacancies. In contrast, regions 30%
with few vacancies have seen large new buildings completed with high occupancy irrespective of 20%
the area band into which they fall.
10%

0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Pre-leasing rate for the next one year (Quarterly average)

Source: CBRE Research, Q3 2024.

25 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Greater Tokyo Area (cont.)

Vacancy rate to fall from 2025 for three central areas Figure 4-5: Greater Tokyo new supply and vacancy rates by area
but will continue to climb in the Ken-O-do area Forecast
1,000,000 tsubo 20%
While new supply for 2025 is set to fall by 14.5% y-o-y to just 502,000 tsubo, approximately half of
this new space is concentrated in the Ken-O-do area, where vacancy is already sizable. This is 900,000
likely to accelerate the rise in vacancy in the area and push up the Greater Tokyo average.
However, for 2026, almost 80% of new supply of 534,000 tsubo during the year is in the Gaikando 800,000 16%
and Route 16 areas, with just 86,000 tsubo in the Ken-O-do area. With demand for space in the
14.4%
14.2%
Gaikando area being particularly robust, CBRE projects the vacancy rate for Greater Tokyo to drop 700,000
below 9% by H2 2026. Polarization in the vacancy rate by district is likely to continue to accelerate
in the coming years (Figure 4-5). 600,000 12%
11.0%
As the Tokyo Bay Area only has a single new building slated for completion between now and the 500,000
8.8%
end of 2026, the area’s existing vacancies should be gradually filled, pushing down vacancy.
In the Gaikando Area, new supply from H2 2025 is set to be concentrated on the Misato/Soka 400,000 8%
(Saitama) sub-area, where five new properties are due to come on stream. With interest already 7.2%
300,000
6.5%
strong, however, CBRE expects the vacancy rate to drop between now and Q4 2026. 5.7%
Although the vacancy rate in the Route 16 Area fell for two consecutive quarters in the first half of 200,000 4%
this year, the two new properties planned for completion in Q1 2025 at the less popular coastal 3.9%
Kanagawa end of the area should drive the vacancy rate back up toward 10%. While it should fall 100,000
again thereafter, any decline is likely to remain moderate as the area still had over 300,000 tsubo
of vacant space available as of Q3 2024. 0 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
The Ken-O-do Area continues to report significant vacancies in Ibaraki and Saitama Prefectures.
As new developments for 2025 are focused on Ibaraki Prefecture, where occupancy is already low, Tokyo Bay Area Gaikando Area Route 16 Area Ken-O-do Area
the area’s vacancy rate is projected to remain above 16% throughout 2025. However, with supply
set to dry up in 2026, the vacancy rate should begin to drop, although it is likely to remain as high
as 14.2% by Q4 2026.
Source: CBRE Research, Q3 2024.

26 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Greater Tokyo Area (cont.)

Effective rents fall marginally across Greater Tokyo Figure 4-6: Greater Tokyo effective rent indices by area
but rise in some areas and sub-markets Forecast
8,000 JPY/tsubo
Greater Tokyo effective rents are projected to stand at JPY 4,500 per tsubo by the end of Q4 2024,
down 0.4% y-o-y. CBRE projects net decreases of a further 1.1% y-o-y for 2025 and 0.2% y-o-y for 7,000 7,580 7,670
2026. As effective rents fell by 0.3% in 2023, this forecast, should it eventuate, would mean four
consecutive years of declining rents (Figure 4-6, Figure 4-7). 6,000 5,310 5,400
Rents in the Ken-O-do area are projected to fall by 3.1% y-o-y in 2025 and by another 3.5% y-o-y in 5,000
4,520 4,500
2026. As vacancies in the area are predicted to extend to around 300,000 tsubo over this period,
this should exert significant downward pressure on rents. Even though the vacancy rate is 4,000 4,500 4,440
projected to begin to fall from 2026, it is likely to take a little longer before rents bottom out. 3,300
3,000
3,530
In the Route 16 area, rents are expected to weaken in and around properties with significant 2019 2020 2021 2022 2023 2024 2025 2026
vacancies, which should result in a slight drop in rents for the area as a whole. In the Gaikando area, Greater Tokyo Tokyo Bay Area Gaikando Area Route 16 Area Ken-O-do Area
vacancy rose to 7.4% in Q3 2024 but is projected to fall between now and 2026. With occupiers Source: CBRE Research, Q3 2024.
increasingly cognizant of the area’s appeal due to its proximity to densely populated urban areas,
rental growth for the district should outpace other areas in Greater Tokyo. As the Tokyo Bay area
has very few properties with vacancies and a limited supply pipeline, rents should also begin to rise Figure 4-7: Y-o-y effective rent increases by area in Greater Tokyo
from 2025. Forecast Forecast Forecast Forecast Forecast
3%
Although rising construction costs are prompting building owners to hike asking rents, effective
2%
rents are unlikely to increase across Greater Tokyo while so many units stand vacant. The

2026
2023
2026
2024

2024

2024

2023
2024
2026
1%

2025

2025

2025
Gaikando area is an obvious exception along with several other sub-areas, such as the Chiba Bay

2022
section of the Route 16 area and the Tokyo Metropolitan section of the Ken-O-do area, which are 0%

2023

2022
2024
2025

2025
2023

2023

2022
2022

2022
already seeing rents increase due to insufficient availability and limited future supply. Properties

2026

2026
with rampways are particularly quick to secure tenants and are therefore most likely to see rent -1%
levels rise. CBRE expects the supply-demand balance and rent level gap to become more -2%
pronounced between different sub-markets within the same area, or even between different -3%
buildings based on their specifications.
-4%
Tokyo Bay Area Gaikando Area Route 16 Area Ken-O-do Area Greater Tokyo

Source: CBRE Research, Q3 2024.

27 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Greater Osaka Area

Vacancy remains low since 2020 as new supply absorbs demand Figure 4-8: Greater Osaka supply-demand balance and vacancy rate
The LMT vacancy rate in the Greater Osaka area is projected to fall by 2.7 pp. y-o-y to 3.3% in Q4 Forecast
500,000 tsubo 25%
2024. Full-year net absorption is predicted to reach 239,000 tsubo, comfortably outstripping new
supply of 192,000 tsubo. With over half of the year’s new supply located in central areas, tenant 400,000 20%
demand has been steadily absorbed (Figure 4-8).
300,000 15%
New supply for 2025 is expected to more than double from 2024’s total, reaching a record-breaking
414,000 tsubo. Despite the rise in new stock, the pre-leasing rate as of Q3 2024 had already
3.3%
200,000 10%
reached 55%. With new supply for 2026 limited to just 160,000 tsubo, the area is not oversupplied.
3.3%
CBRE projects a vacancy rate of 3.3% by the end of 2026. Since 2020, the highest that the vacancy 100,000 5%
rate has reached was 6.0% in Q4 2023. This is the lowest high point among all four major cities,
with Greater Osaka also reporting the smallest variance between high and low vacancy rate 0 0%
extremes. However, vacancies in properties possessing no significant advantage in terms of 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
location or specifications are now taking a long time to fill. New Supply Net Absorption Vacancy Rate
Source: CBRE Research, Q3 2024.
Tenants in Greater Osaka are now expressing interest in an extremely broad geographical area. In
2023, several properties in peripheral areas away from major concentrations of logistics facilities
were struggling to secure tenants. However, 2024 witnessed more interest in properties in
peripheral areas as companies started to recalibrate their logistics networks and consider these
locations for the large floor space and rampway-fitted convenience they offer. Major tenants are
now beginning to hail from a broader range of sectors, including logistics, e-commerce, retail, and
manufacturing.
Rents are on the rise in both central and peripheral areas, with CBRE expecting effective rents to
rise by 2.2% y-o-y in Q4 2024. While a lack of upcoming supply in low-rent suburban areas should
slow the pace of rental hikes, CBRE projects increases of 1.2% y-o-y and 1.4% y-o-y for 2025 and
2026, respectively.

28 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

04 Logistics

Greater Nagoya Area

Strong demand drives rent increases Figure 4-9: Greater Nagoya supply-demand balance and vacancy rate
The LMT logistics facility vacancy rate for Greater Nagoya is projected to reach 12.6% by the end Forecast
210,000 tsubo 21%
of Q4 2024, up 2.1 pp. y-o-y. While new supply for 2024 consists of just 93,000 tsubo, only around
180,000 18%
half of each of the previous two years' figures, net absorption is projected to reach around 65,000
tsubo. Secondary vacancies generated by the record 201,000 tsubo of new supply that came on 150,000
12.6% 15%
stream in 2023 are also affecting net absorption. New supply for 2025 is projected to reach 197,000 120,000 8.8% 12%
tsubo, just below 2023’s levels. The leasing of two major facilities boasting total floor space in
90,000 9%
excess of 50,000 tsubo is likely to exert a significant influence on the supply-demand balance.
However, demand for such large spaces is on the rise as many companies look to expand or 60,000 6%
overhaul their logistics networks. Combined with a drop in new supply in 2026, this should serve to 30,000 3%
lower the area’s vacancy rate to around 8.8%. As interest remains strong in properties in sought-
0 0%
after locations, CBRE projects effective rents to rise by 1.1% y-o-y in Q4 2024, followed by more
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
steady growth with subsequent increases of 0.8% y-o-y in 2025 and 1.1% y-o-y in 2026 (Figure 4-9). New Supply Net Absorption Vacancy Rate
Source: CBRE Research, Q3 2024.

Greater Fukuoka Area Figure 4-10: Greater Fukuoka supply-demand balance and vacancy rate
Forecast
Net absorption for 2024 reaches 100,000 tsubo amid solid rental gains 120,000 tsubo 16%
The LMT vacancy rate in the Greater Fukuoka area is projected to slip as low as 4.5% in Q4 2024,
down 3.6 pp. from a year ago, as full-year net absorption exceeds 100,000 tsubo for the first time. 90,000 12%
New supply is set to fall briefly in 2025 after three straight years of significant new construction,
before returning with 95,000 tsubo in 2026. With only limited availability and a recent trend for
4.5%
60,000 8%
lease contracts to include an expansion in floor space, demand is robust. CBRE therefore expects
the vacancy rate to only rise to approximately 5.3% by Q4 2026. Effective rents, which have risen 5.3%
by an average of 3.1% y-o-y over the three years to 2023, should continue to rise, albeit at a slightly 30,000 4%
slower rate. CBRE projects rents to rise by 1.7% per annum from 2024 onwards, the strongest
growth among all four major cities (Figure 4-10). 0 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
New Supply Net Absorption Vacancy Rate
Source: CBRE Research, Q3 2024.

29 CBRE RESEARCH © 2024 CBRE, INC.

05

Retail
In 2024, vacancy rates declined in high streets nationwide as retailers in a wide range of industries became more eager
to open new stores. In 2025, rents should continue to rise as retailers compete for a limited number of available plots as
demand for new store openings is likely to remain robust.
 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

Retail Market Summary

Average rents in high street areas continue to rise nationwide Figure 5-1: Vacancy rate (upper graph) and average rents (lower graph)
Vacancy rates fell below 1% in five of the nine high street areas of Japan surveyed by CBRE in Q3
2024, compared to just one in Q4 2023. The number of areas in which average rents exceeded 6%
those of Q4 2019, the pre-pandemic peak, increased over the same period from three to four. 5%
The robustness of the retail sector is being fueled by strong retailer demand predicated on 4%
consumption by foreign tourists. While luxury goods brands were the major drivers of leasing 3%
demand during the pandemic, requirements have since expanded to encompass a broad range of
2%
retail sectors. Resurgent demand for storefront space is leading to the absorption of vacancies and
pushing up rents. 1%

With retailer demand projected to remain strong and available units limited in number, rents should 0%
銀座 表参道・原宿 新宿 渋谷 心斎橋 京都 神戸 栄 天神

Tenjin
Omotesando/
Ginza

Shibuya

Shinsaibashi

Kyoto
Harajuku

Shinjuku

Kobe

Sakae
continue rising for the next two years. CBRE projects average rents in Ginza to reach JPY 285,100
per tsubo by the end of 2026, up 8.4% from Q3 2024. New supply over this period is slated to
consist of seven properties, of which only two still have vacancies remaining. Competition for these JPY / tsubo
remaining units should force rent levels moderately upward over the next two years. 300
With an even tighter supply-demand balance than Ginza, Shinsaibashi has no vacant units available
for immediate occupancy. Only two of the five new properties slated for completion over the next 250
two years have units still available. While a lack of availability may curtail new store openings, any
200
available units are almost certain to command rents that will push up the area average. Rents in
Shinsaibashi may even match those in Ginza in the near future. 150

100

50
Q4 2019 Q3 2024
* Vacancy rates are calculated by tabulating the number of prime area street-level units available for immediate occupancy.
Average rents are calculated by taking the average of estimated achievable rents from five different points set in each high street area.
Source: CBRE Research, October 2024.

31 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

2024 Retail Market

Inbound tourist consumption boosts retailer revenue Figure 5-2: Inbound tourist consumption in Japan
Inbound tourist consumption remained robust in Japan in H1 2024: a trend partially attributable to JPY billion
250 JPY billion 2,500
the weak yen. According to Cabinet Office figures, inbound tourist consumption grew 58% y-o-y in
H1 2024, with duty-free sales in department stores up by 161% over the same period. These figures 200 2,000
represented increases of 33% and 81% respectively over the pre-pandemic figures of H1 2019 150 1,500
(Figure 5-2). Retailers also registered healthy revenue in regional cities. Department store revenue
100 1,000
by retail floor space in both Fukuoka and Kobe this year rose by 22% over 2019’s figures, on par
with the 23% registered in Tokyo over the same period (Figure 5-3). 50 500

After enjoying a successful first half of the year in terms of revenue performance, sales lost 0 0

2018.3

2018.9

2019.3

2019.9

2024.3

2024.9
2020.3

2020.9

2022.3

2022.9

2023.3

2023.9
2021.3

2021.9
momentum during H2 2024, partially due to the appreciation of the yen. The yen bottomed out at
JPY 161/USD in Q2 2024, and had risen by 7.8% to reach JPY 148/USD by Q3 2024. As a result,
while duty-free sales by department stores rose 55.3% y-o-y in Q3 2024, this represented a slower Tax-free sales in department stores Inbound consumption (RHS)
growth from earlier in the year. Other key changes observed by CBRE in H2 2024 included a shift in * The amount of inbound spending refers to "direct purchases made by non-resident households within Japan.
the strategies of overseas-based retailers. Due to concerns over potential economic downturns in Source: Japan Department Stores Association, Cabinet Office, Government of Japan, CBRE Research, November 2024.

China and the U.S., some overseas-based retailers turned more selective towards committing to
new global investments, including those in the Tokyo high street. However, such cases of retailers Figure 5-3: Revenue by floor space of department stores in major cities
have been very few, with retailer appetite remaining generally robust.
700 35%

(monthly averages, JPY 1,000/tsubo)

600 30%

Revenue by floor space

500 25%
400 20%
300 15%
200 10%
100 5%
0 0%
Tokyo Osaka Nagoya Kyoto Kobe Fukuoka

Q1-Q3 2019 Q1-Q3 2024 % change (RHS)

* Revenue by floor space is calculated by dividing each month’s revenue by floor space, and averaging the figures over a period of time
Source: Japan Department Stores Association, CBRE Research, November 2024.

32 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

2024 Retail Market (cont.)

Surging retailer demand lowers vacancy and pushes up rents Figure 5-4: New openings in prime areas
Prime area vacancy rates in all nine high street areas surveyed by CBRE declined over the course
of 2024. Most areas saw vacancy rates slide by 2 to 3 pp. between Q4 2023 and Q3 2024, with as 5,000 tsubo
Others
many as five areas (Ginza, Omotesando/Harajuku, Shibuya, Shinsaibashi and Sakae) now recording Furniture&Goods
vacancy rates of below 1%, up from just one such area in Q4 2023 (Figure 5-1). Solid leasing 4,000
Technology
demand has pushed down vacancy, with fashion (apparel, bags, etc.), outdoor/sporting goods, and 3,000 Reuse
luxury goods, accounting for 41%, 19%, and 10%, respectively, of all new floor space opened in the Other goods
first three quarters of 2024 (Figure 5-4). 2,000 F&B
Luxury
This surge in retailer demand has also led to significant increases in rents. Average rents in the 1,000 Outdoors&Sports
nine areas nationwide surveyed by CBRE in Q3 2024 (calculated by taking the average of Fashion
0
estimated achievable rents from five different points set in each area) grew by up to 19% y-o-y Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024
(Figure 5-5). The number of areas in which average rents exceeded those of Q4 2019, the pre-
* Total floor space for all new openings or new contracts. Includes all available space in prime areas on high streets nationwide (nine areas in
pandemic peak, increased over the same period from three to four, with Kyoto joining Ginza, total) for immediate occupancy or for occupancy within 18 months of survey date (including incomplete developments).
Shinsaibashi and Kobe. Source: CBRE Research, October 2024.

With luxury brands having been the major drivers of rent hikes since the pandemic, rental growth in
prime areas has eclipsed that of more peripheral locations. Encouraged by the recovery of inbound Figure 5-5: Average rents
tourist spending since 2023, retailers from a wider range of industries have begun searching for JPY 1,000/tsubo
new store space, pushing up rents in all areas. The lack of available units in Tokyo, Shinsaibashi 300 ±0％ ＋10.6％
＋3％
and Kyoto is driving up rents not only in prime locations but in some of the secondary areas as well. 250
±0％
200 ＋12.4％
150 ＋19.2％ ＋1.9％
100 ±0％ ＋3.7％
50
0
Ginza Omotesando/ Shinjuku Shibuya Shinsaibashi Kyoto Kobe Sakae Tenjin
Harajuku (Osaka) (Nagoya) (Fukuoka)
Tokyo Greater Osaka and others

Q4 2023 Q3 2024
* Calculated by taking the average of estimated achievable rents from five different points set in each area. Numbers are % change.
Source: CBRE Research, October 2024.

33 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

Retailer Demand in 2025

Apparel, luxury, and outdoor and sporting goods brands to drive demand Figure 5-6: Demand for street-level stores by area and industry
CBRE’s analysis of demand by sector (Figure 5-6) reveals that the retailer types most likely to drive 30%
demand in the Tokyo high street rental retail markets (all four areas) are apparel, followed by
outdoor/sporting, and food and beverages. In Greater Osaka (three areas), luxury brands lead the 20%

way, followed by other goods (which includes such commodities as character goods), and 10%
outdoor/sporting goods.
0%
The relative strength of demand from luxury goods brands in the Greater Osaka region is partly

Other goods

Luxury
Apparel

Outdoors &

Health &

Showroom
Shoes & Bags

Others
Watches &

F&B

Reuse
Accessories

Accessories

Beauty
Jewelry &
due to the fact that while inbound tourist consumption is extremely healthy, many in the sector do

Glasses

Fashion

Sports
not have sufficient floor space, or indeed any stores at all, in the area to capitalize on that demand.
Some 66% of luxury brands with street-level stores in Tokyo have yet to open a store in
Shinsaibashi, Kyoto and Kobe, while total prime area street-level store space in Shinsaibashi is only Fashion Others
4,700 tsubo, less than 40% of Ginza’s figure of 12,700 tsubo. Tokyo Greater Osaka (Shinsaibashi, Kyoto and Kobe)
Despite robust demand, many areas only have very limited space available for lease. This is leading * Collated by CBRE between January and November 2024; cross-sector totals sum to 100% for each of Tokyo and Greater Osaka.
Source: CBRE Research, November 2024.
to strong competition for space, with the inevitable result that many retailers will be unable to
secure their desired properties. CBRE’s comparison of desired floor space and preferred rent levels
for store space in Tokyo divided by sector (Figure 5-7) shows that for units of just over 90 tsubo in Figure 5-7: Demand for street-level store space (criteria sought by major retail sectors in Tokyo)
size, several sectors, including apparel, have strong interest, and all have similar budgets. Should
40
competition intensify between retailers from these sectors, rents are likely to be pushed upward.

(million JPY, average budget per month)

35
For spaces with more than 150 tsubo, the likelihood of signing contracts is largely limited to luxury Luxury
goods brands, given their financial capacity to afford the much higher rents such properties 30

Preferred rent levels

command. With the few lease contracts signed for such spaces during 2024 tending to involve 25

luxury goods brands, this sector should continue to drive the market for larger units in the coming 20
15 Apparel Outdoor &
years.
10
Sports
5
0
30 60 90 120 150 180 210
-5
Desired floor space (tsubo, average)

* Collated by CBRE between January and November 2024; circle area represents the number of reports recorded.
Source: CBRE Research, November 2024.

34 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

Landlord Strategies in 2025

Owners look to raise rents for existing tenants Figure 5-8: Rent recalibration plans for street-level stores (by area)
CBRE believes there is a possibility that rents will be raised not only for new tenants, but also for
100%
existing ones. According to a CBRE survey carried out in July 2024, over 70% of owners of
properties in Tokyo (all four areas) and Shinsaibashi indicated that they planned to raise rents for 80%
existing tenants, while the equivalent figures for owners in Sakae and Tenjin were also above 50%
(Figure 5-8). 60% Don't know

This reflects the general trend for rising high street rents along with landlords’ operating Decrease rent
40%
environment. When asked in the same survey to select the three factors about which they are most Increase rent
concerned over the 12 months, 83.5% of property owners selected rising construction and 20%
maintenance costs, placing this one factor over 40 pp. clear of all others. Many landlords are
0%
considering raising rents to boost profit margins that have been shrinking as a result of increased Tokyo Shinsaibashi Sakae Tenjin
costs. The desire to increase profit margins was also visible from owners’ answers to the question (Osaka) (Nagoya) (Fukuoka)
of what types of retailer they wished to contract. The most commonly selected category of retailer * Survey respondents: owners of properties in high street or adjacent areas nationwide planning to set new rent levels. n=292
was luxury brands (57.9%, Figure 5-9), reflecting owners’ preferences for luxury brands which can Source: CBRE Research, July 2024.

afford to pay higher rents.

The difficulty of securing new high street locations in the current climate makes lease renewals or Figure 5-9: Landlords’ preferred sector to lease to,
or in which they have a strong interest (up to three choices)
extensions even more crucial for existing tenants. An increasing number of retailers are therefore
likely to acquiesce to higher rents as an unavoidable cost of securing or maintaining vital storefront Luxury
space. Apparel
Showroom
Jewelry and accessories
F&B
Watches & Glasses
Outdoors & Sports
Health & Beauty
Drug Store
Shoes & Bags
0% 10% 20% 30% 40% 50% 60% 70%
* Survey respondents: owners of properties in high street or adjacent areas nationwide. Sectors displayed are those mentioned by at least 10%
of respondents. n=525
Source: CBRE Research, July 2024.

35 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

05 Retail

Rental Outlook
Rents likely to continue rising as supply-demand balance remains tight Figure 5-10: Average rent forecast in Ginza
CBRE projects rents to continue to rise nationwide in 2025 and 2026, backed by strong retailer Forecast
300 5%
demand for new store openings. Even if a rising yen stifles inbound tourist consumption, retail sales
are very unlikely to fall below pre-pandemic levels. With new supply extremely limited, the supply-
demand balance is projected to remain tight. Just 26 new buildings are slated for completion in 280 4%
prime areas nationwide between now and the end of 2026, with over half of units in these
properties already pre-leased. 260 3%

Average rent (JPY 1,000/tsubo)

CBRE projects Ginza average rents to reach JPY 285,100 per tsubo by the end of 2026, up 8.4%
from Q3 2024 (Figure 5-10). There remain a large number of retailers planning to open new stores 240 2%
in the Ginza area, with interest seen from a broad range of sectors including luxury goods, apparel,
watches and eyewear, and outdoor/sporting goods. Among the high street areas nationwide, Ginza 220 1%
is projected to see the largest number of new supply over the next two years, with seven properties
due to come on stream, of which only two have any vacancies remaining. Competition for these 200 0%
remaining units should force rent levels upward.
Rents in Shinsaibashi are set to rise for the same reasons as those in Ginza, with luxury brands and 180 -1%
outdoor/sporting goods brands likely to be the key drivers of demand. With an even tighter supply-
demand balance than Ginza, Shinsaibashi had no vacant units available for immediate occupancy 160 -2%
as of Q3 2024. Of the five new buildings slated for completion in the area over the next two years,
three have already confirmed tenants. While a lack of availability is likely to somewhat constrain 140 -3%
new store openings, any available units are likely to command rents that will push up the area

Q3 2018

Q3 2019
Q4 2018
Q1 2019

Q4 2019

Q2 2020

Q2 2024
Q2 2021

Q2 2022

Q2 2023

Q2 2025

Q2 2026
Q3 2020

Q3 2021

Q3 2022

Q3 2023

Q3 2024

Q3 2025

Q3 2026
Q2 2018

Q2 2019

Q1 2020

Q4 2020
Q1 2021

Q4 2021
Q1 2022

Q4 2022
Q1 2023

Q4 2023
Q1 2024

Q4 2024
Q1 2025

Q4 2025
Q1 2026

Q4 2026
average. Rents in Shinsaibashi may therefore reach Ginza levels in the very near future.

Average rent Q-o-Q (RHS)

* Average rents are calculated by taking the average of estimated achievable rents from five different points set in each high street area.
Source: CBRE Research, November 2024.

36 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

MEMO:

37 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

MEMO:

38 CBRE RESEARCH © 2024 CBRE, INC.

 Intelligent Investment Asia Pacific Real Estate Market Outlook 2025 | Japan

MEMO:

39 CBRE RESEARCH © 2024 CBRE, INC.

Contacts
CBRE Japan Research

Hiroshi Okubo
Managing Director
Head of Research
hiroshi.okubo@cbre.com

Chinatsu Hani Tomoya Nose Kazuko Takahashi Seiya Umeki

Senior Director / Thought Leadership Leader Associate Director Senior Director Associate Director
Investment Team Leader Investment Team Industrial Team Leader Industrial Team
chinatsu.hani@cbre.com tomoya.nose@cbre.com kazuko.takahashi@cbre.com seiya.umeki@cbre.com

Yuji Iwama Yoshitaka Igarashi Kumiko Ninomiya Asuka Honda

Director Director Analyst Director
Office Team Leader / Data center Office Team Leader / Hotel Office Team Retail Team Leader
yuji.iwama@cbre.com yoshitaka.igarashi@cbre.com kumiko.ninomiya@cbre.com asuka.honda@cbre.com

Global and Regional Research

Richard Barkham Ph.D. Henry Chin, Ph.D. Ada Choi, CFA

Global Chief Economist Global Chief Operating Officer, Research Head of Research, Asia Pacific
& Global Head of Research Global Head of Investor Thought Leadership ada.choi@cbre.com
richard.barkham@cbre.com henry.chin@cbre.com

© Copyright 2024. All rights reserved. This report has been prepared in good faith, based on CBRE’s current anecdotal and evidence based views of the commercial real estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to
significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and
actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change.

Nothing in this report should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities—of CBRE or any other company—based on the views herein. CBRE disclaims all liability for
securities purchased or sold based on information herein, and by viewing this report, you waive all claims against CBRE as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the
information herein.